Blockchain On Road To Becoming More Energy Efficient And Decentralized
Blockchain technology is often criticized for the large amounts of energy that it requires, particularly when it comes to the mining process of bitcoin and other cryptocurrencies. Those criticizing this aspect often tend to remind people that blockchain may be responsible for pushing the world closer towards global warming. However, while this may be true, there are ways in which blockchain can improve the world and be useful to the energy industry at the same time.
One thing to keep in mind is that distributed ledger technology has the potential to impact countless industries, including everything from energy trade to microgrids. For example, if blockchain can enable micro-suppliers to contribute small amounts of electricity and receive quick and easy payments in return, they will improve decentralization and make the bills cheaper at the same time. Additional benefits can come if large energy producers start using blockchain to trade with each other, as both security and efficiency can be increased due to low energy prices.
Blockchain incorporation in microgrids
As mentioned, blockchain can make a lot of positive changes in the energy industry through the incorporation in microgrids. Microgrids had existed even before blockchain and Bitcoin came into the picture, and were mostly distributed by definition. They are made of small energy providers such as solar farms or wind turbines, all of which are linked together in a network that can provide power without depending on large, centralized companies and power plants.
However, the development of such projects has significantly slowed down in recent years. Still, blockchain technology has a potential to restart the growth of this sector, thus offering multiple advantages, such as cheaper electricity, interoperability of multiple sources of energy with customers, and alike. This is one of the goals of EWF (Energy Web Foundation), which is a nonprofit organization with an international reach that aims to improve the energy industry through the use of distributed ledger technology.
In fact, according to Peter Bronski, the EWF director of marketing, the organization is creating a core blockchain which is similar in some ways to the Ethereum blockchain. In a way, the project can be viewed as the Energy Web Chain.
The project is currently released in beta, and its genesis block is expected to be mined in Q2 2019. Once fully operational, it will allow the use of smart contracts that can help monitor the production and distribution of energy, all of which is going to be renewable.
The project has already caught the interest of multiple large corporations that have partnered with the platform, such as Siemens, while companies like Centrica, Engine, Shell, E.On, Iberdrola are currently considered affiliates.
The project will bring efficiency and transparency to energy consumption, while small energy producers will be paid for their contribution quickly.
Additional blockchain use cases in the energy industry
So far, we have already seen how blockchain can offer a secure transaction record and rewards for energy producers, but there are many other use cases for this tech in the energy industry. Another important use case is in the area of energy markets, which include all sources of energy, such as oil, coal, gas, and others. There are already platforms that allow these and other assets to be traded, such as Vakt, which was established in June 2018.
Vakt functions as a post-trade processing platform, and it started working in November 2018 by allowing the recording of oil trades. However, the company plans to expand the platform and include all energy commodities that can be physically traded.
The company already has several high-profile customers, such as Mercuria, BP, Equinor, Shell, and Gunvor. The platform plans to run on J.P. Morgan's Quorum blockchain, which is very similar to Ethereum, and it allows zero-knowledge proofs and public and private blockchains.
Another similar project is created by a Switzerland-based alliance of largest banks and commodity firms, Komgo. Komgo has also attracted the attention of many companies that already support Vakt, which shows that these firms are strongly interested in blockchain-based projects that can affect the energy industry.
Difficulties on the road to blockchain
Of course, the switch to blockchain will not be easy in the energy industry, as there are numerous challenges that need to be solved. These obstacles come in many shapes and forms, from technical issues such as interoperability, energy efficiency, scalability, and alike, to the proper legal frameworks and regulations that will make it safe to use.
Companies working on these projects have recognized scalability as one of the largest, if not the largest issue. They are currently trying to resolve it in several ways, such as using different consensus mechanisms like Proof-of-Authority. PoA does not require intensive cryptographic computations typical for PoW, which allows the chain to reach far greater capacities. Other specific features, such as making a permissioned blockchain that will keep crucial information secret and only visible to a certain participant is also of high value to the projects and companies that are involved.